Iceland's president vetoes repayment of £3.37 billion Icesave bill

Iceland's president has refused to sign a bill passed by the country's parliament to repay more than £3.37 billion lost by savers of the collapsed Icesave bank in Britain and the Netherlands, and said he will hold a national referendum. The bill, which was passed by a narrow margin in the parliament, is likely to face strong opposition at a referendum.

Following fierce opposition as well as widespread public anger in Iceland for footing a private bank's bill, Iceland's President Olafur Grimsson declined to sign the bill into law, making it to be the second time in Iceland's history that the country's president has not signed a bill passed by the parliament.

On 31 December, the Iceland parliament passed the bill by a narrow vote of 33 to 30 to approve payment of about £3.37 billion to the UK and the Netherlands, to cover the losses of depositors in the online bank Icesave, which went bust during the collapse of Iceland's financial system in late 2008. (See: Iceland to repay €3.8 billion to British, Dutch investors).

Almost 300,000 British savers had their accounts in the bank frozen in October 2008 following the failure of its parent company Landsbanki. The British and Dutch governments agreed at the time to compensate savers for the full amount of their losses and have since put pressure on Iceland to repay the debt.

According to analysts, the settlement, which is about 40 per cent of Iceland's gross domestic product, will cost about €12,000 for each citizen on the island nation of 320,000.

However, the government supports the bill citing Iceland's proposed bid for the European Union membership and the aid coming from the International Monetary Fund may be frozen if Iceland renegades on paying its debts.